Council Committee opens budget deliberations with Finance Department review

The Maui County Council’s Budget, Finance and Economic Development Committee launched its first day of fiscal year 2027 deliberations on Wednesday in Council Chambers, beginning with an overview from the Department of Finance.

In opening remarks, Budget Committee Chair Yuki Lei Sugimura told committee members they faced “a lot of work” ahead. Mayor Richard Bissen is proposing a $1.616 billion budget, which represents a 3.7% increase from $1.558 billion in the current fiscal year. The administration’s budget calls for allotting $1.245 billion for operations and $371.1 million for capital improvements.

Sugimura said the administration’s budget proposes more than 90 expansion positions while there are over 90 vacant positions countywide.

Council Member Nohelani Uʻu-Hodgins pointed to the 90 proposed new positions and asked: “Do we ever look at our vacancies and say, ‘OK, maybe we don’t need this one anymore. It’s been vacant for X amount of years? And then do we see that reflected in the budget?”

Budget Director Lesley Milner said the administration has looked at reducing the number of vacant positions, but some expansion positions are in departments where there’s no existing position or where there’s growth requiring a new position.

“So we’re trying to look at all available options to try and cut down on our vacancies,” she said.

Council Member Gabe Johnson put a positive spin on the matter.

“I’m an optimist,” he said, recalling the county previously had 700 open positions countywide, “and now we’re down to 500, and so we’re moving in the right direction.”

$174 million in carryover savings

Uʻu-Hodgins also asked about Maui County’s current $174 million in carryover savings. “What’s our plan to either spend that money or better tax our residents so we don’t have this much carryover?”

Milner said all of the carryover savings is allocated within the mayor’s proposed budget. “So that’s our plan to spend,” she said. “The longer answer is we are working on recognizing the amount of revenue that we feel comfortable (with).”

A large amount of the carryover savings is from unanticipated revenue, “so we’re working on recognizing more of those, which will cut down on carryover savings in future years.” 

Uʻu-Hodgins asked whether examples of unanticipated revenue include the transient accommodations tax income and other fluctuating funds.

Milner confirmed that and said another example would be county investments, although in today’s financial climate those are “unreliable,” but the county tries to stay conservative, although “we’ve had a few good years, so we’ve had significant unanticipated revenues in that category.”

“Let’s hope that continues and hopefully our nation doesn’t spiral into a crazy recession,” Uʻu-Hodgins said.

Council Member Kauanoe Batangan followed up on Uʻu-Hodgins’s line of questioning, recalling that only 60% of the $174 million in carryover savings was from unanticipated revenues.

“So, by my calculations, we still tax our citizens roughly $75 million for goods and services that we did not deliver on, and we’re now asking for a larger budget,” he said. “How confident are we that we can deliver on all the goods and services that are being proposed here?”

Milner said the administration tries to propose a budget, every year, “that we feel is achievable within the fiscal year.”

“We do have cost savings, which is not always a bad thing,” she said. “We have departments who think something’s going to cost $1 million, “and it costs $750,000, and that (difference) becomes carryover savings. So I don’t want us to get into a situation where we have department spending just so their budgets don’t get cut in future years. I want them to continue to be fiscally responsible.”

Milner said she understood Batangan’s point – that “we don’t want to be taxing the population for services that aren’t delivered… I feel that, even with carryover savings, the services that have been promised to the constituency have been delivered year over year.”

She said she’s happy to have ongoing discussions about areas within the county budget to find savings as council members continue their deliberations over the next month.

Property taxes and other Maui County revenue

In an earlier discussion of Maui County revenue, more than 80% comes from taxes, led by an estimated $660.2 million in real property taxes forecast fiscal 2027, general excise taxes $75 million and transient accommodations taxes $65 million. Other sources of revenue include bond/lapsed bond $201.9 million, charges for current services $198.8 million and carryover savings $174.3 million.

Council Member Tom Cook asked about the administration’s proposal to increase short-term transient vacation rentals valued at more than $3 million up by 9% from $15.55 to $17 per thousand dollars of assessed value. He said he understood that that increase was aimed at offsetting the reduction in property values and keep revenue at current levels.

Department of Finance Director Marcy Martin acknowledged that the increase is to offset a decline in values, “and the revenue in this class is actually based upon the mayor’s rates projected to go down again. We don’t have the final values yet, but that was our estimate.”

“Even with the rate increases, the taxes will go down,” she said.

Regarding tax rates, Johnson recalled that wealthy Americans are “getting massive tax breaks” under the administration of Republican President Donald Trump.

“And I think that, here locally, we should consider those federal tax breaks when we talk about our property taxes, (and) those folks who have a $4.5 million house,” he said.

Martin agreed that there are some Maui County taxpayers who’d fit that description who own multimillion-dollar homes. However, there’s also a significant population of long-term kamaaina property owners who don’t qualify for local tax breaks, who’ve lived on oceanfront property for many, many years, she said. “And so it’s a balance between those two groups,” she said.

Auditor’s findings

In an afternoon discussion about auditors’ findings, committee members learned that Maui County has two material weaknesses and one significant deficiency, all of which were repeat findings from the prior year.

The findings relate to:

• System limitations around the Maui County transit accommodation tax
• Certain financial reporting internal controls
• Controls over capital assets

The administration responded that the Department of Finance previously lacked a software system for the TAT systems, but the department now has one and is implementing it; other issues have been or are being corrected.

Global insecurity

Global instability also remains worrisome, which was one of the main points of last week’s presentation by University of Hawaiʻi economist Carl Bonham. He warned that Maui County is vulnerable from federal and global uncertainties, a stagnant job market and a precarious reliance on wealthy tourists.

On Wednesday, committee members expressed concern that the ongoing war in Iran might negatively impact the cost of municipal bonds.

Milner remained optimistic about municipal bonds.

“I know the war at this point is having a significant impact on our stock market and things like that,” she said. But “I do think that investing in bonds is something that folks feel pretty secure in, which does put us in a better position, considering our (bond) ratings.”

Deputy Finance Director Maria Zielinski said the war “doesn’t seem to have any impact right now.” She noted that Maui County will probably not issue a bond until the summer or right before the end of fiscal 2027, which would be June 30 of that year.

Meanwhile, rising oil prices and global tensions are expected to drive up utility costs for Hawaiian Electric customers, including Maui County. The islands are vulnerable to fuel market instability because of the state’s reliance on imported fuel.

Residential bills are forecasted to increase 20% to 30% over the next several months. Rebecca Dayhuff Matsushima, vice president of customer service at Hawaiian Electric, said the company wants customers to be “informed, prepared and supported” during the transition.

Coming up

The Budget Committee has begun a series of community meetings through April 16. The first one was held Wednesday evening at the Mayor Hannibal Tavares Community Center in Pukalani. Another will be held at 6 p.m. today at the Pāʻia Community Center Social Hall.

Here’s the schedule for other meetings, all of which begin at 6 p.m.

• April 6, Helene Hall, Social Hall, 174 Keawa Pl., Hāna
• April 8, Kīhei Community Center, Main Hall, 303 E. Līpoa St., Kīhei
• April 9, Lahaina Civic Center, Social Hall, 1840 Honoapiʻilani Hwy., Lahaina
• April 13, Mitchell Pauʻole Community Center, 90 Ainoa St., Molokai
• April 15, Lānaʻi High & Elementary School Cafeteria, 555 Fraser Ave., Lānaʻi City
• April 16, Council Chamber, Kalana o Maui Building, 8th floor, 200 S. High St., Wailuku (County Council public hearing)